Menu

Mediation update: discussing and negotiating early

The courts have often stressed that parties should mediate early before litigation hardens attitudes and costs become an additional aggravating factor. In Kupeli and others v Sirketi (t/a Cyprus Turkish Airlines) and another, the High Court restated the now familiar message that parties should discuss or negotiate their dispute early.

Kupeli and others v Sirketi (t/a Cyprus Turkish Airlines) and another

Kupeli and others v Sirketi (t/a Cyprus Turkish Airlines) and another concerned claims by a number of claimants who had booked flights with the airline CTA. When CTA’s air operator’s licence was revoked and its flights grounded, the second defendant, Atlasjet, agreed with the government of the Turkish Republic of Northern Cyprus to transport CTA’s passengers.

None of the claimants succeeded in getting onto replacement flights with Atlasjet and they sued to recover their losses. CTA played no part in the trial. Following an order made at the CMC, only some of the claimants were selected for trial, with the others undertaking to be bound by the determination at trial of any issues common to the claimants.

At trial:

Only the claimants with a confirmed booking with Atlasjet established a contractual relationship. However, all of those claimants still needed to show a breach of contract by Atlasjet.

As to who was the successful party, Whipple J found that the claimants had won as they were to receive a cheque. Atlasjet was ordered to pay their costs.

The next question was whether the claimants’ costs should be discounted, reduced or offset? On this, there were two matters that reduced the amount Atlasjet should pay to something less than 100%:

The claimants lost every one of their list of issues.

At trial, the majority of the contractual claims were lost, with only a minority succeeding.

Whipple J rejected making an issues-based costs order, fearing that would lead to the difficulty of having to identify those issues that costs attached to. Instead, she ordered that the claimants should receive a percentage of their costs.

As to what that percentage should be, the claimants argued they ought to receive a higher percentage of their costs due to Atlasjet’s conduct, including that:

In April 2015, the claimants made an offer to settle on a Calderbank basis. This gave two options for settlement (one in the form of a cash offer), but Atlasjet rejected that offer and made no counter offer.

There was an attempt at ADR seven days before trial, but Atlasjet rejected out of hand all suggestions of settlement, negotiation or ADR the claimants put forward prior to that.

Whipple J noted there was “a mass of accusation and counter accusation going to each party’s conduct”, which she was unable to resolve. However, she did take into consideration Atlasjet’s failure to make full disclosure and its resistance to all early attempts to discuss or negotiate.

On the failure to discuss or negotiate early, Whipple J said:

“This case was crying out for some sensible attempt at negotiation before costs racked up and the parties’ attitudes hardened.”

Even so the court noted:

Atlasjet did not answer the claimants’ pre-action protocol letter.

Although the claimants’ Calderbank letter was, as things turned out, pitched too high, “it was at least some attempt at settlement”.

Atlasjet refused the claimants’ offer but made no counter offer.

While Whipple J did accept that it would never be known if the case could have been settled, she said, even if the case could not be settled:

“…an early meeting would surely have focused the minds of those involved, and is likely to have led at least to some narrowing of issues, which would in the end have saved costs.”

Whipple J concluded by reminding parties that:

“There is a world of difference between a case which comes to trial after reasonable efforts at settlement have been made but settlement has proved impossible, and a case where one party has simply refused to engage, preferring to take the view that it will see its opponents in Court. This is the latter type of case. That attitude inevitably gets weighed in the balance when it comes to costs, if that party fails.”

Weighing the various factors together and taking into account the overall outcome of the case, the outcome on particular issues and the conduct of the parties, Atlasjet was ordered to pay 33% of the claimants’ reasonable costs.

Conclusion

The remarks of Whipple J about ADR are not new, but they serve as useful reminder about what the courts expect from parties when it comes to the question of ADR.

“The parties may take the view that a better course, to avoid the risk of legal costs escalating on both sides in a manner disproportionate to the amount truly in dispute, would be to sit down and arrive at a fair figure for payment to resolve all their differences.”